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A T H E R O S C O M M U N I C A T I O N S, I N C.

WIRELESS FUTURE. UNLEASHED NOW.

© ATHEROS COMMUNICATIONS

Investor Relations PresentationInvestor Relations Presentation

Q2 2008

W I R E L E S S F U T U R E. U N L E A S H E D N O W .

2

Safe Harbor StatementSafe Harbor StatementSome of the information in this presentation contains projections or other forward-

looking statements regarding future events, market trends, the future financial performance of Atheros Communications, Inc., and the expected growth drivers

for Atheros in 2008 and beyond. These statements involve risks and uncertainties, and actual events or results may differ materially. Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are general economic and market conditions; the extent to

which the markets for WLAN, Bluetooth, Ethernet and GPS semiconductors and other semiconductor products will grow; our ability to execute our business

strategy; our ability to manage our growth and diversification into new markets; our ability to forecast accurately revenues from sales of our products and costs of production; the effects of competition in the marketplace; our ability to retain and attract employees; market acceptance of our existing and new products; our ability

to develop new products and technologies for WLAN, Bluetooth, Ethernet, GPS and other wireless and wired communications markets that are successful in these markets; and other factors detailed in our filings with the Securities and Exchange

Commission, including our recent filings on Forms 10-K, 10-Q and 8-K.


3

Atheros OverviewAtheros OverviewProfitable fabless semiconductor company driving highly integrated communications platformsBoth a technology & cost leaderLeveraging our core competency of building communications solutions in standard digital CMOSStrong product cycles driving revenue growth in core WLAN businessDelivering on our promise to build a diversified communications IC semiconductor company

ROCm Mobile WLAN, Bluetooth and GPSFast/Gigabit Ethernet solutions for both PCs and switching PHS/PAS single chip handset solutions


4

Recent HighlightsRecent HighlightsRecord Q1 Revenue

12th consecutive quarter of revenue growthNetworking revenue exceptionally strong – up 14% sequentially− Strength in retail, driven by 11n and design wins− Continued strength in carrier networking; high WLAN attach-rates− Growth in Ethernet in a seasonally weak quarter; 10/100 switch design wins strong

Consumer revenue up over 40% sequentially

In the NewsIntroduction of AR1511 single-chip GPS solutionAnnounced mobile partnerships with Infineon and NVIDIAAtheros added as a Wi-Fi Alliance Board member

Strong Business ModelGross margins remained above 50%Disciplined spending; operating margin 15.3%Healthy cash generation; cash balance increased to $256m


5

Atheros Expanding Into New MarketsAtheros Expanding Into New Markets

ExpansionOf Atheros Technologies

PHS/PAS

NetworkingPCsDesktop, Notebook &Mini/PMPC

Gateways, APs, Routers and A/V

Cellular, Gaming,PMP & Cameras

Consumer

0-300m Units 200-500m Units >1B Units

Market Size

Leverage Key OEMCustomers

GPSGPS GPSGPS GPSGPS


66

Rapidly Expanding Addressable MarketsRapidly Expanding Addressable Markets

2007 2008 2009 2010

8000

7000

6000

5000

4000

3000

2000

1000

0

$ Million

Bluetooth

Mobile WLAN

PC - WLAN

Carrier/Enterprise - WLANRetail SOHO - WLANEthernetPAS

Source: Bluetooth - IMS, 2006; Mobile LAN and PC – In-Stat, 2007;Carrier/Enterprise, Retail SOHO and Ethernet – Dell’Oro, 2007;PAS – Forward Concepts, 2007 Handset and Chip Report and Atheros;GPS – In-Stat, 2007.

32% CAGR GPS


7

Industry Leading Customers Choose AtherosIndustry Leading Customers Choose Atheros

ODMs

PC OEMPC OEM NetworkingNetworking ConsumerConsumer


Atheros Growth Drivers for 2008Atheros Growth Drivers for 2008

11n adoption becomes widespread while 11g grows

PC OEM adoption of 11n due to single-chip offerings

Integrated 11n SoC chipsets provide cost effective AP/routers

Carriers upgrade to 11n for video, voice and robust data distribution

11g continues to service the value PCs and a variety of new client devices

8

0

50

100

150

200

250

300

350

400

2005 2006 2007 2008 2009 2010 2011

11b 11g 11a/g 11n

We Are Here…

Source: InStat, Dell’Oro Group, 2007

Milli

ons

of U

nits


Atheros Growth Drivers for 2008Atheros Growth Drivers for 2008

Ethernet penetration into Tier 1 PC OEMs, wireless access points/routers and the adoption of Gigabit Ethernet

ROCm WLAN design wins in a wide variety of handset and consumer electronics products

Lowest power mobile WLAN products available in the market

Addition of the Atheros GPS product lineNew product line to leverage in 2008

Initial revenue shipments of Atheros Bluetooth productsAddressing the headset and PC market initially

9

AR9102(RF)

AR9130(NPU/MAC/BB)

AR8216(Switch)


10

Personal Computing – 34% of Q1 RevenuePersonal Computing – 34% of Q1 RevenuePrimary revenue comes from WLAN sales into PC OEMs

ATHR is the non-Centrino leader for WLAN in PC OEMsWLAN footprint at 11 of the top 12 PC OEMsMultiple generations of PCI and PCI Express solutions; 11ag, 11gand 11n (single and dual band)

Gigabit and Fast Ethernet Products for PC OEMsLOM and PHY Fast and Gigabit Ethernet products in mass productionShipped over 20 million ports of Ethernet in 2007Cost downs of Ethernet products throughout 2008

Growth drivers include Growth drivers include 11n adoption in notebooks, Sub $500 notebook TAM

expansion and Ethernet market share gains


11

Personal Computing – Expanding OpportunitiesPersonal Computing – Expanding Opportunities

Featured Product: ASUS’ Revolutionary EeePCIn volume productionPrices points sub-$300Features Atheros 11g WLAN (AR2425) and 10/100 Ethernet

Atheros’ new 9280/81 Single-Chip 11n2x2 802.11a/g/n & 1x2 802.11g/n Smallest footprint, most cost-effective package - 10mm x 10mm QFN packageContains up to 50% fewer RBOM components vs. competing 11n solution


Focused on Growth in PCFocused on Growth in PC

First to market with single-chip 11n

Commenced volume production in Q1; significant

11n PC OEM design wins achieved

Most complete & compelling PC WLAN line-up

Best-in-class 802.11g & 11n single-chips

Broad OS/Platform support: Windows, MAC, Linux

Global, multi-source supply chain

Secure, reliable, responsive

Delivering more connectivity value to PC customers

Ethernet, Bluetooth

AR2425 (11g)

AR9280 (11n)


13

Networking – 59% of Q1 RevenueNetworking – 59% of Q1 Revenue

Primary revenue from sale of WLAN products to Retail channel11n is major growth driver in 2008Integrated11n SoC products in volume productionAll major retail customers shipping Atheros 11nIncreased adoption of Ethernet switching solutions in retail

WLAN solutions for Enterprise & Carrier CustomersStrong and growing presence in DSL home gateway solutions with Atheros 11g/n WLAN and Ethernet switchingDesign cycles are longer and stickierDriving a wide variety of enterprise and city-wide wireless solutions

Growth drivers include:Growth drivers include:Growing 11n adoption in retail, high volume 11g routers, increased

attach rates in DSL gateways, overall market share gains


14

Carrier OpportunityCarrier Opportunity300 million broadband subscribers worldwideAttach-rate of WLAN on modems is increasingAtheros has WLAN reference designs with most major broadband IC vendorsAtheros is part of major global carrier deployments

Atheros has three products targeting the carriersHigh-end: AR9160/AR9106 (3x3 11n)

Mid-tier: AR9220/9223 (single-chip 2x2 11n)

Low-end: AR2417 (single-chip 11g with $1.00 RBOM)


15

Consumer – 7% of Q1 RevenueConsumer – 7% of Q1 RevenueHistorically, revenue driven by our industry leading PAS Solution

Highly integrated CMOS single chip solution

ROCm revenue an important growth driver

Key Partnerships include QCOM, MSFT, TXN & Compal

New Products for 2008

Bluetooth headsets; BQB qualified in Q1 08

Full line of GPS products for PNDs, handsets and PCs

Growth drivers include:Growth drivers include:High volume ROCm consumer wins, dual-mode ROCm handset

design wins, expansion into GPS and Bluetooth products


16

Consumer Market UpdateConsumer Market Update

ROCm mobile WLAN solutions have gained significant design

win momentum

Strong design wins in consumer products such as gaming

Initial GPS revenue recorded in Q1 08

New AR1511 product with AGPS launched

PC and Headset product line for Bluetooth

Significant penetration in the PHS/PAS mobile handset market


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Q1 08 Financial SummaryQ1 08 Financial SummaryRevenue of $114.5M; slightly above guidance

12th consecutive quarter of record revenue

Gross margins of 51.2%* slightly above the guided range of 50%-51%

Q108 EPS* of $.28; High-end of guidance of $.27-$.28

Solid balance sheet metricsCash and investments increased to $256m;

Strong Q208 GuidanceRevenue growth of 4%-6%, GM%* 50% - 51%, Op. Ex* up 0% - 2.5% and EPS* of $.29-$.30

* Note: Excludes non-cash FAS123R charges, acquisition related charges , non-operating charge for impairment of long-term investments and the related tax impact of all proforma adjustments


18

Comparative and Sequential Revenue Growth Comparative and Sequential Revenue Growth

$ in millions

12 consecutive quarters of revenue growth

Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08

110

100

90

80

70

60

50

40

30

20

10

$61.1

$53.1

$45.8

$79.6

$95.5

$73.2

$87.8

$95.5$100.8

$106.3

$114.3

$43.4

$114.5

$ in millions

400

350

300

250

200

150

100

50

$87.8

51%CAGR

200720062005

$417.0

$301.7

$183.7


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Gross Margin % TrendsGross Margin % Trends

50

45

40

35

30

25

20

15

10

5

Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08

Gross margins continue to exceed long term targets

Q1 gross margins above guidance

Using standard digital CMOS provides Atheros greater foundry supply options

48.0% 47.6% 48.0% 49.7%52.3%

49.3%49.1%51.2%

Target Gross Margin Model of 45% - 47%


20

Revenue Mix – Q1 2008Revenue Mix – Q1 2008

• 11n adoption strong in Retail; 11g primarily driven by PC OEMs

• Strength in Networking driven by Carrier & Retail customers• Consumer up more than 40% sequentially


21

Key MetricsKey Metrics

( 000’s Except Ratios ) Q2 07 Q3 07 Q4 07 Q1 08

Revenue/Employee $570 $566 $547 $499

DSO 44 46 46 57

Inventory Turns 7.0 7.1 6.2 5.9

CashBalance $228,200 $248,304 $249,997 $255,570


22

Target Operating ModelTarget Operating Model

52.3%Gross Margin

20.6%R&D

19.0%Operating Profit

12.7%SG&A

100.0%Revenue

Q4 2007

Excludes non-cash FAS123R charges and acquisition related charges

51.2%

22.7%

15.3%

13.2%

100.0%

Q1 2008

45 - 47%

16 - 18%

17 - 19%

100.0%

10 - 12%

Target Model


23

SummarySummaryLeveraging our skills in CMOS integration and wireless systems solutions to build a large communications IC company

Leader in WLAN solutions for Personal Computing and Networking

R&D Investments over the past 2 years are driving strong operating performance today

Multiple product lines driving 2008 growth and beyondStrong expansion of Core Wireless LAN 11a/b/g/n revenue ROCm products for embedded WLAN achieving strong design win momentumAvailability of a full line of 10/100/1000 Ethernet NIC, PHY & Switch productsPortfolio of GPS products for PNDs, Handsets and PCsAddition of the AR30xx ROCm Bluetooth products

A T H E R O S C O M M U N I C A T I O N S, I N C.

WIRELESS FUTURE. UNLEASHED NOW.

© ATHEROS COMMUNICATIONS

Investor Relations PresentationInvestor Relations Presentation

Q2 2008

Documents

A T H E R O S C O M M U N I C A T I O N S, I N C.library.corporate-ir.net/library/14/149/149102/items/290808/Q208... · Cellular, Gaming, PMP & Cameras ... ÖSmallest footprint, most